In the
United States Court of Appeals
For the Seventh Circuit
Nos. 11-3822 & 11-3824
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
L ACEY P HILLIPS and E RIN H ALL,
Defendants-Appellants.
Appeals from the United States District Court
for the Western District of Wisconsin.
No. 11-cr-12-bbc—Barbara B. Crabb, Judge.
A RGUED M AY 30, 2012—D ECIDED A UGUST 2, 2012
Before E ASTERBROOK, Chief Judge, and B AUER and
P OSNER, Circuit Judges.
E ASTERBROOK, Chief Judge. Lacey Phillips and Erin Hall
decided to buy a house together. They asked Associated
Bank for a mortgage loan. It said no, because Hall had a
recent bankruptcy and the couple’s joint income (approxi-
mately $3,800 a month) was too low for the loan they
needed (more than $200,000). Phillips and Hall next
turned to Brian Bowling, a mortgage broker. Bowling told
2 Nos. 11-3822 & 11-3824
them that they could qualify under what he called the
“stated income loan program”—his label for an ap-
proach designed to deceive lenders. Bowling prepared
an application that omitted Hall’s name (avoiding a
credit check that would have revealed his bankruptcy),
attributed the combined income of Hall and Phillips to
Phillips alone, doubled that combined income, and
falsely claimed that Phillips was a sales manager at a
satellite TV business. (Bowling knew that the $90,000
annual income Phillips claimed to earn needed to
match the job she claimed to hold; actually she was a
hair stylist at J.C. Penney, with an annual income less
than $24,000.) Phillips signed the application and an
employment verification form. Fremont Investment &
Loan extended credit, and the couple bought their home.
But they could not keep up the payments, and the mort-
gage holder foreclosed. (There was a second mortgage
too, but it need not be discussed.)
Bowling and associates at his firm Platinum Concepts
repeated this process often enough that they were bound
to be caught. He pleaded guilty to bank fraud and, in an
effort to lower his own sentence, agreed to assist in the
prosecution of his clients. Phillips and Hall were among
the clients the United States prosecuted. A jury con-
victed them of violating 18 U.S.C. §1014, and the judge
sentenced each to two months’ imprisonment plus three
years’ supervised release and about $90,000 in restitu-
tion. Bowling is serving a sentence of 38 months.
Phillips and Hall contend that Bowling’s statements
provide them with a defense. The district judge barred
Nos. 11-3822 & 11-3824 3
them from asking questions designed to elicit testimony
that he assured them that the “stated income loan pro-
gram” is lawful; the judge also foreclosed an argument
that Phillips made a mistake of fact when signing the
loan application and employment verification form.
According to defendants, §1014 is a specific-intent crime,
and they were hindered in showing the lack of intent.
The district judge concluded, however, that Phillips and
Hall sought to argue a mistake of law, not an error of
fact or a lack of the required intent. The instructions
required the jury to acquit unless it found beyond a
reasonable doubt that Phillips and Hall knew that the
statements on the application and form were false; a
genuine mistake of fact would have led to acquittal.
What Phillips and Hall really wanted to argue, the judge
wrote, is that Bowling’s false assurances about the
legality of lying to lenders exculpate the lies; that would
be a mistake-of-law defense, and “[t]he rule that ‘ig-
norance of the law will not excuse’ is deep in our law.”
Lambert v. California, 355 U.S. 225, 228 (1958) (citations
omitted). Compare United States v. Feola, 420 U.S. 671, 687
(1975), with Ratzlaf v. United States, 510 U.S. 135, 149 (1994).
Section 1014 is a simple statute. It reads: “Whoever
knowingly makes any false statement . . . for the purpose
of influencing in any way the action of [any of a long list
of entities, including federally insured lenders] shall be
fined not more than $1,000,000 or imprisoned not more
than 30 years, or both.” There are just three elements:
(1) knowingly making a false statement; (2) to one of
the listed entities; (3) for the purpose of influencing that
entity. Phillips and Hall concede that the documents
4 Nos. 11-3822 & 11-3824
contain many false statements, and the jury found that
Phillips signed them knowing their contents to be false.
Defendants concede that Fremont was among the
entities listed in §1014. (We say “was” because that special-
ist in subprime credit collapsed in spring 2007, having
made all too many loans to people who could not repay.
Its failure was a harbinger of things to come.) That
leaves “for the purpose of influencing in any way the
action” of the lender. This can reasonably be described as
a specific-intent element. But it is a specific specific-intent
element. That is, it describes exactly the required mental
state; it does not require proof that the defendant knew
that his acts were unlawful. The bank fraud statute,
18 U.S.C. §1344, requires proof of intent to defraud;
§1014 is a different animal, requiring only proof of intent
to influence. See United States v. Lane, 323 F.3d 568, 582–85
(7th Cir. 2003).
Suppose Bowling had testified that he assured defen-
dants that federal law allows them to deceive lenders.
Such testimony would not have tended to negate the
intent element in §1014. The statute does not require
proof that the defendants knew their acts to have been
unlawful or to constitute fraud; it requires only intent to
influence the lender. Bowling set out to do exactly that:
influence a lender, so that the “no” from Associated
Bank would turn into a “yes” from someone else. Defen-
dants’ goal likewise was to find a way to influence a
lender to put up the money so they could buy a house.
The evidence of defendants’ intent to influence a lender
is strong; defendants themselves do not argue that
the evidence is insufficient.
Nos. 11-3822 & 11-3824 5
We do not know what Bowling would have testified
had defense counsel been allowed to ask extra questions,
but the prosecutor has not asked us to treat as a for-
feiture the absence of an offer of proof. Fed. R. Evid.
103(a)(2). We therefore must assume that Bowling would
have testified along the lines explored at oral argument.
Perhaps Bowling would have testified, for example,
that he assured defendants that false statements about
income and employment are permissible because banks
don’t care about the answers—that banks plan to sell or
securitize the loans, so someone else will bear any loss.
Bowling might have told Phillips and Hall that all
lenders care about is having the paperwork appear to be
in order, so that they can package the loans for resale.
But if Bowling had testified in this fashion, it would not
have helped the defense. It would not have negated
the falsity of the statement (element 1), the identity of the
lender (element 2), or the defendants’ intent to influence
the lender (element 3). Quite the contrary, it would have
bolstered the prosecution’s case by showing that
Bowling led defendants to believe that false statements
would succeed in influencing the lender, thus reinforcing
proof of element 3. Testimony of this kind would have
led defendants to believe that the lender would not
verify the borrowers’ claims about income and employ-
ment (as Fremont didn’t verify them).
Negating the sort of defense Phillips and Hall wanted
to offer may have been why the United States prosecuted
under §1014 rather than §1344, which requires proof
of intent to defraud. Negating this kind of defense also
6 Nos. 11-3822 & 11-3824
may be why Congress enacted §1014. The argument that
no wrong has been done because the loss will be passed
along to someone else, such as a syndicate investing
in securitized loans, or the Treasury via a guaranty, is
short-sighted; the loss is still there, and the fact that it
is borne by someone other than the immediate lender is
a good reason to make it a crime to lie to influence a
bank, especially when the bank does not care about the
truth because it expects to shift the loss to a stranger. If
it is a crime to make false statements that help banks
“put the paperwork in apparent order”, then there will
be fewer un-sustainable loans and fewer losses to
investors; credit will go to people who can repay, rather
than the people most willing to exaggerate their income.
The sort of defense that Phillips and Hall wanted to
make would have been relevant if §1014 required the
false statement to be material. Many anti-fraud statutes,
including §1344, require proof of materiality, a term that
the Supreme Court understands to mean “ ‘[having] a
natural tendency to influence, or [being] capable of in-
fluencing, the decision of’ the . . . body to which it was
addressed.” Kungys v. United States, 485 U.S. 759, 770
(1988) (citations omitted). If Bowling had testified along
the lines we have hypothesized, defendants could have
argued that they lacked the intent to make a material
misstatement, because Bowling led them to believe that
the truth of what they put in the application would not
matter to the lender.
Section 1014 does not require proof of materiality,
however. That’s the holding of United States v. Wells, 519
Nos. 11-3822 & 11-3824 7
U.S. 482 (1997). Justice Stevens argued in dissent that
the absence of a materiality requirement would make it
a felony to flatter a bank official in the hope that
he will reciprocate with a loan. 519 U.S. at 500–13. The
majority did not deny this consequence; it said only that
prosecution for “trivial or innocent conduct” (id. at 498)
would be unusual, and it reiterated that a person who
“knows the falsity of what he says and intends
to influence the institution” (id. at 499) violates §1014.
Statements that a bank would view as trivial probably
won’t influence it, and such statements therefore will not
be made for the purpose of influencing it. But Phillips
and Hall misrepresented their income, and Phillips’s
employment, knowing (if only because Bowling told
them) that such details do influence lenders. They were
right; Fremont made the loan even though Associated
Bank, which knew the truth, refused. And because de-
fendants knew the statements to be false (so the jury
found), they violated §1014 whether or not they could
have been convicted of violating §1344.
Phillips and Hall are not the first defendants to argue
that they should be acquitted because, although they
lied to a bank, they thought that the bank cared only
about paperwork and not about the truth of their repre-
sentations. When seeking a loan, Vincent Lane lied
about his net worth. In his prosecution under §1014,
Lane contended that the bank actually knew the truth
and didn’t care about it (beyond wanting the paperwork
to look good); according to Lane, the bank cared only
about a third party’s guaranty of the indebtedness. The
district court excluded evidence that would have sup-
8 Nos. 11-3822 & 11-3824
ported Lane’s position, just as the district court here
excluded evidence about what Bowling told Phillips
and Hall. We affirmed, holding that making false state-
ments to make paperwork look good, and thus be ac-
ceptable to a bank, violates §1014 even if the bank does
not give a hoot about the statements’ truth. 323 F.3d
at 582–85.
Defendants reply that although materiality is not an
element of the §1014 offense, “subjective materiality”
(Reply Br. 12, 14, 16) is—and that as a result of Bowling’s
statements they lacked “subjective materiality.” We
don’t follow this. When materiality is an element of a
crime, then the prosecutor must show that the
defendant intended to make a material statement; that’s
a subjective inquiry. But when materiality is not an
element—as it is not under §1014—then the defendant’s
beliefs about materiality are irrelevant. The prosecution
must show whatever mental states matter to the
statutory elements. For §1014, this means knowledge
of falsity and intent to influence the lender. What
Phillips and Hall thought or believed about other
matters, such as materiality, is no more relevant than
whether Phillips and Hall thought that the loan would
contribute to tax evasion, air pollution, or any other
element of some other statute. The district court’s order
limiting the subjects on which Bowling could testify
therefore was proper.
A FFIRMED
Nos. 11-3822 & 11-3824 9
P OSNER, Circuit Judge, dissenting. The defendants
are entitled to a new trial. At the government’s urging,
the trial judge erroneously excluded, as irrelevant,
evidence that might have convinced the jury that the
defendants had not made statements that they knew to
be false or that, knowing them to be false, yet had not
made them “for the purpose of influencing in any way
the [bank’s] action” on their mortgage application. 18
U.S.C. § 1014. The judge ruled that if mortgage ap-
plicants “sign something and they send it in, they’re
attempting to influence the bank . . . . They didn’t sign
these papers just to put them up on their wall. They
signed these papers with the idea that they would go
into whoever and they would get a mortgage . . . . [If de-
fendant Phillips] just took the papers and went home, we
would not have a crime. But by sending them in to the
mortgage company, she’s met the requirements of 1014.”
I am not suggesting that the evidence presented by the
government was insufficient for a conviction, only that
evidence that could have persuaded the jury that the
defendants’ guilt had not been proved beyond a rea-
sonable doubt was erroneously excluded. In the passage
that I just quoted, the judge implied that making a false
statement that influences a bank is a crime. It isn’t. The
statement must be knowingly false. The judge ex-
cluded evidence that if believed would have negated
that element—and would also have undermined the
inference of intent to influence the bank. Nor am I sug-
gesting that the jury was erroneously instructed. The
point rather is that the judge’s misunderstanding of
10 Nos. 11-3822 & 11-3824
the statute led her to exclude evidence that might have
exonerated the defendants.
The statute punishes “whoever knowingly makes any
false statement or report, or willfully overvalues any
land, property or security, for the purpose of influencing
in any way the action of” the various entities listed in
the statute, which includes federally insured banks
and other lenders. The statute doesn’t say “whoever
knowingly makes a false statement in a loan application
or other document submitted to a bank is, without more,
punishable.” The application as a whole is bound to be
intended to influence the bank’s decision, but that doesn’t
mean that every knowingly false statement in it is
intended to influence the bank. The critical phrase “for
the purpose of influencing” refers to the “false state-
ment,” not to the application as a whole. Suppose you’re
an actress and you habitually subtract three years from
your true age because you’re worried about movie pro-
ducers’ discriminating against aging actresses. You’re 40
but pretend to be 37. You know the bank doesn’t care
whether you’re 40 or 37—you’re wealthy and the bank
is eager to have you as a customer—but you don’t like
your true age to appear on any document, because a
bank employee might read it and discover the lie and
post his discovery on Facebook or Twitter and within
hours the whole world would be privy to the shameful
truth. You made a knowingly false statement on your
bank application by listing your age as 37 and rather
than just pinning the application to your wall you sub-
mitted it to the bank. Under the district judge’s inter-
pretation of section 1014—an interpretation that warped
Nos. 11-3822 & 11-3824 11
the trial—you would be guilty of a felony punishable by
a prison sentence of up to 30 years and a maximum fine
of up to $1,000,000.
What is true is that if a defendant makes a knowingly
false statement intending to influence a bank, it is no
defense that he didn’t succeed in influencing it or even
that he couldn’t have succeeded. Materiality is not an
element of the offense punished by section 1014. United
States v. Wells, 519 U.S. 482, 484 (1997). Materiality
is relevant, however, because if the defendant is under
the impression that his falsehood would not influence
the bank, it would be unlikely that his purpose in making
it had been to influence the bank; what is the point
of making an effort to attain what one knows is unat-
tainable?
The Supreme Court recognized this in Wells
when it said that “a statement made ‘for the purpose
of influencing’ a bank will not usually be about some-
thing a banker would regard as trivial, and ‘it will be
relatively rare that the Government will be able to
prove that’ a false statement ‘was . . . made with the
subjective intent’ of influencing a decision unless it
could first prove that the statement has ‘the natural ten-
dency to influence the decision.’ Hence the literal reading
of the statute will not normally take the scope of § 1014
beyond the limit that a materiality requirement would
impose.” Id. at 499, quoting Kungys v. United States, 485
U.S. 759, 780-81 (1988). Thus, the Court declined to read
a requirement of proving materiality into the statute
not because materiality is irrelevant but because “the
12 Nos. 11-3822 & 11-3824
literal reading of the statute” (the reading that ex-
cludes materiality as an element of the offense) allows im-
materiality to be used as evidence that the false state-
ment was not intended to influence the bank.
If the defendants believed that all the bank cared about
was that the applicant for a loan have a good credit
rating, which defendant Phillips, the mortgage ap-
plicant, did, they could not have believed that even the
statement of income would influence the bank’s decision
any more than pinning Phillips’s baby pictures to the
application would have influenced it. And if one
believes the defendants’ version of what their mortgage
broker told them—a version they were forbidden to
present to the jury—they didn’t think that including in
the space for “borrower’s income” a non-borrower’s
income would affect the bank’s decision, as all the bank
cared about was the total income available to service
the loan and the non-borrower was the applicant’s “sig-
nificant other” and future spouse. What can it mean to
intend to influence a bank by telling it something
you’re confident won’t influence it?
The defendants were a financially unsophisticated
couple (a hairdresser and a barber) who wanted to
buy a house. They had never owned a home and were
unfamiliar with the mortgage application process. Like
countless American couples during the housing bubble
they found a house they mistakenly thought they could
afford and applied to a bank for a mortgage. The bank
turned them down because of defendant Hall’s poor
credit record. They turned next to a mortgage broker
Nos. 11-3822 & 11-3824 13
named Bowling, whom Hall was acquainted with and
admired. That was in 2006, as the housing bubble was
about to burst. Unbeknownst to the defendants, Bowling
was a crook who brokered fraudulent loans—indeed
who contributed to the financial crisis triggered by the
bubble’s bursting. He found an unscrupulous (soon to
be notorious) bank, Fremont Investment & Loan, willing
to lend to impecunious suckers. Had Fremont been the
bank that had turned the defendants down before
they turned to Bowling for help in getting a mortgage,
this would have been evidence that they realized they
didn’t meet the bank’s criteria for a loan and so would
be able to qualify for a loan only by lying. But it was
a different bank.
Fremont was willing to make a “stated income”
loan—indeed, such loans were its specialty. Stated-
income loans are known to the knowing as “liars’ loans,”
because in a stated-income loan the lender accepts the
borrower’s statement of his income without making
any effort to verify it. Such loans, which played a sig-
nificant role in the financial collapse of Septem-
ber 2008—the doleful consequences of which continue
to plague the U.S. and world economies—were profitable
because lenders sold them as soon as they’d made
them and so avoided the high risk of default. Many of
the loans were repackaged by the buyers into ill-
fated mortgage-backed securities whose holders lost
their shirts.
The defendants soon lost their house. Despite valiant
efforts to keep up their mortgage payments by working
14 Nos. 11-3822 & 11-3824
second jobs, they were unable to make the monthly pay-
ments of principal and interest required by the terms of
the mortgage. The interest rate was an adjustable rate
that reset automatically after two years; doubtless it
reset at a higher rate (“a large majority of Fremont’s
subprime loans [the loan to the defendants was subprime]
were adjustable rate mortgage (ARM) loans, which bore
a fixed interest rate for the first two or three years, and
then adjusted every six months to a considerably
higher variable rate for the remaining period of what
was generally a thirty year loan.” Commonwealth v.
Fremont Investment & Loan, 897 N.E.2d 548, 552 (Mass.
2008). Though hapless victims of Bowling, the defendants
were convicted in part on the basis of his testimony at
their trial; for he turned state’s evidence and was
rewarded for helping to convict his victims by being
given a big slice off his sentence. (The exercise of pros-
ecutorial discretion in this case was abysmal, but that
is not our business.)
The defendants wanted to be allowed to testify that
Bowling had told them, first, that defendant Phillips
should be the only applicant for the stated-income loan
because her credit history was good and Hall’s was bad;
second, that Hall’s income should be added to hers on
the line in the application that asked for the borrower’s
gross monthly income; and third, that this was proper
in the case of a stated-income loan because what the
bank was asking for was the total income from which
the loan would be repaid rather than just the bor-
rower’s personal income. Phillips and Hall were a cou-
ple. They were not married when they applied for
Nos. 11-3822 & 11-3824 15
the loan—but many couples are not married nowadays.
(They have since married.)
The judge forbade the defendants to testify to these
things because she couldn’t see the relevance of such
testimony. The government adds that it would have
been hearsay. Not so (a surprising mistake for a Justice
Department lawyer to make). The defendants were
offering the testimony about Bowling’s alleged state-
ments not to prove that a stated-income loan does permit
what Bowling told them it did, but to explain what
they had believed when they made the application. It
is not hearsay to testify to what someone told you and
what you thought he meant, as long as it’s not evidence
about “the truth of the matter asserted in the [out-of-court]
statement.” Fed. R. Evid. 801(c); Talmage v. Harris, 486
F.3d 968, 975 (7th Cir. 2007); United States v. Hanson,
994 F.2d 403, 406–07 (7th Cir. 1993); United States v. Thomp-
son, 279 F.3d 1043, 1047 (D.C. Cir. 2002). The defendants
wanted to testify not that Bowling had told them the
truth but that his lies had made them misunderstand
the meaning of “borrower’s income” in an application
for a stated-income loan.
The evidence they were prevented from giving was
pertinent both to whether they had knowingly made a
false statement and whether if so they had done so in
order to influence the bank to grant them a mort-
gage—the two key elements of the offense for which
they were being tried. They wanted to testify that
Bowling had told them that in a stated-income loan the
line for the borrower’s income on the application form
16 Nos. 11-3822 & 11-3824
really means the borrower’s income plus the income of
a spouse, or parent, or a person one is cohabiting with
in advance of intended marriage, or anyone else whose
income will be an additional source of repayment of the
mortgage. On this interpretation, which financial naïfs
like these defendants could believe, they weren’t trying
to influence the bank by means of a false statement,
because on that interpretation all the bank was asking
for in the line for borrower’s income was the total
income out of which the mortgage would be repaid. The
defendants must have known that in a literal sense
Hall’s income was not part of the borrower’s, Phillips’s,
income. But literal meanings are not the only true
meanings of phrases or sentences or other linguistic
units. In light of Bowling’s explanation to which the
defendants were not permitted to testify, his gulls
could well believe that when the bank asked for bor-
rower’s income it meant borrower’s income or combined
income if someone else’s income could if necessary be
used to meet the borrower’s mortgage obligations. Or
that “personal gross income” is a term of art meaning
spouses’ combined income. Lay persons often believe—and
often with reason—that the meaning of a statement in
a legal document is not ordinary meaning, but legal or
commercial jargon.
Indeed the bank may have been asking for either an
individual’s income or a combined income. Fremont was
a notorious high-flying subprime lender. It went broke
in June of 2008—a harbinger of the worldwide financial
collapse that occurred three months later when Lehman
Brothers suddenly declared bankruptcy. See Common-
Nos. 11-3822 & 11-3824 17
wealth v. Fremont Investment & Loan, supra, 897 N.E.2d at
551–55; In re Fremont Investment & Loan, Docket No. FDIC-
07-035b (FDIC Order to Cease and Desist, Mar. 7, 2007),
www.fdic.gov/bank/individual/enforcement/2007-03-00.pdf
(visited July 30, 2012); Megan Woolhouse, “Lender
Settles with State for $10m,” Boston Globe (June 10, 2009)
(the “very terms [of Fremont’s loans]—short-term interest
rates followed by payment shock, plus high loan-to-
value and high debt-to-income ratios—were likely to lead
to default and foreclosure”); “U.S. Regulators Order
Fremont Investment & Loan to Tighten Its Loan Policies
and Operations,” New York Times (Mar. 8, 2007).
A reasonable jury, if permitted, as the jury in this
case should have been, to consider the evidence of what
Bowling told Phillips and what she believed, might have
decided that she was trying to influence the bank not
by concealing Hall (with his bad credit record) but by
reporting an income from which the mortgage would
be repaid that was large enough to persuade the bank
that the loan would not be unduly risky. As long as
the loan application asked for that measure of income,
she was trying to influence the bank by means of a state-
ment that she believed to be true.
The jury rendered a general verdict, simply finding
the defendants guilty of both counts of the indictment
(the section 1014 count and a count charging the de-
fendants with having conspired to violate section 1014).
The verdict did not reveal what false statements the
jury attributed to the defendants. For all we can know, the
only false statement to the bank that the jury found that
18 Nos. 11-3822 & 11-3824
Phillips and Hall had known to be false (given that Hall
hadn’t signed the application and that neither of the
defendants may have read it) was the statement of
income in the borrower’s line on the form—for they’d
admitted to having combined their incomes on that line,
but denied knowledge of the other exaggerations (see
next paragraph). Those they attributed to Bowling; and
since they weren’t permitted to explain themselves, the
jury had no choice but to convict them on the basis of
the income statement alone.
It’s true that the combined income was inflated on
the application and that Phillips’s job was falsely listed
as that of a sales manager rather than a hairdresser to
make the income figure credible. Philipps testified, how-
ever, that the form was filled out by Bowling and that
neither she nor Hall read it or was aware of the inac-
curacies in it. Bowling had told them about adding
Hall’s income to hers in the line for the borrower’s
income but not that he would inflate their combined
income or misrepresent her job. The government does
not argue that by signing the form she adopted the
false statements in it that she was unaware of, nor would
that be a plausible reading of a criminal statute that
forbids only false statements made “knowingly.” It is
careless to sign a document without reading it, but it is
a knowing adoption of its contents only if the signer is
playing the ostrich game (“willful blindness”), that is, not
reading it because of what she knows or suspects is in it.
In re Aimster Copyright Litigation, 334 F.3d 643, 650 (7th
Cir. 2003); United States v. Azubike, 564 F.3d 59, 66–67
(1st Cir. 2009); United States v. Aina-Marshall, 336 F.3d
167, 170–71 (2d Cir. 2003).
Nos. 11-3822 & 11-3824 19
There are other grounds on which the jury might
have convicted the defendants, but they are very weak.
For example, because Hall didn’t sign the application
form, the bank could not have sought a deficiency judg-
ment against him when the mortgage was defaulted. But
deficiency judgments are rarely sought in Wisconsin,
because under Wisconsin law if you foreclose within
six months, as mortgagees like to do, you can’t get a
deficiency judgment. Wis. Stat. 846.101. And what bank
would bother to seek a deficiency judgment against a
barber? And anyway Fremont was not a conventional
bank. Its business model was to sell the mortgages it
issued, not to administer and if necessary foreclose
on them.
To summarize: the district court’s key error was to
prevent testimony about what Bowling said to the defen-
dants when he directed them to sign the submission to
the bank. He may have said to them: “Your application
isn’t illegal,” Or: “Whatever you write on it won’t affect
the bank’s lending decision because it doesn’t scrutinize
the applications.” Or: “Combining your income isn’t a
misstatement under Fremont’s stated-income loan pro-
gram.” The first statement would not have helped the
defendants because mistake of law is not a defense. The
second statement, however, would have supported the
defense of no intent to influence and the third would
have been rebuttal to the prosecution’s claim that they
had knowingly made a false statement to the bank.
8-2-12